Carpe Diem

From today’s employment report: Manufacturing, housing and energy sectors all show job gains in December

From today’s Employment Situation report from the BLS:

1. Manufacturing employment increased by 34,000 jobs in December, bringing the total increase in factory payrolls for the year to 180,000.  The 180,000 gain in factory jobs last year follows previous annual increases of 233,000 jobs in 2011 and 109,000 jobs in 2010 – that’s a 522,000 increase in manufacturing employment over the last three years, and brings factory jobs in the U.S. to their highest level since April 2009.

2. Transportation equipment jobs increased by 5,6000 for the month of December and by almost 70,000 jobs for the year, reflecting the strong demand and sales for new vehicles, which reached a 5-year high in 2012.

3. Construction jobs increased by 30,000 last month, as the housing sector continues to recover.  On a quarterly basis, the 45,000 increase in construction jobs for the October-December period was one of the largest three-month gains since 2006.

4. Reflecting America’s booming shale revolution, which has brought U.S. crude oil production to its highest level since 1993, oil and gas extraction jobs increased in December to a 25-year high of 198,400, the highest number of direct drilling jobs since December 1987.  For the year, more than 12,000 new oil and gas extraction jobs were added, which is a rate of 50 new energy-related jobs every day – and that’s just for drilling jobs and doesn’t count all of the additional indirect jobs created throughout the supply chain for oil and gas drilling (transportation, equipment, sand, housing, etc.).

Bottom line: As reflected in today’s employment report, three of the strongest sectors of the U.S. economy continue to be manufacturing (including motor vehicles), housing (construction) and energy (oil and gas drilling).  Looking forward, we can expect ongoing expansion in output and jobs from those three engines of U.S. economic growth in 2013.

 

48 thoughts on “From today’s employment report: Manufacturing, housing and energy sectors all show job gains in December

  1. Bottom line: As reflected in today’s employment report, three of the strongest sectors of the U.S. economy continue to be manufacturing (including motor vehicles), housing (construction) and energy (oil and gas drilling). Looking forward, we can expect ongoing expansion in output and jobs from those three engines of U.S. economic growth in 2013.

    Engines of economic growth? Aren’t you forgetting QE to infinity which makes it possible for weak companies to stay afloat? What do you think happens if the Fed’s expansionist policies stop? Or if they don’t?

    • What did members of the Fed Open Market Committee (FOMC) have to say:

      “Various members stressed the importance of a continuing assessment of labor market developments and reviews of the program’s efficacy and costs at upcoming FOMC meetings. In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.”

      Read more: http://www.businessinsider.com/december-fomc-minutes-2013-1#ixzz2H1asuhu7

      QE to infinity might be running out of time and space.

      • QE to infinity might be running out of time and space.

        Really? What happens to the bond market and the financial sector when the Fed stops buying 80% of the debt issued by the Treasury? The economy depends on cheap credit as far as the eye can see. Without it the consumer has to retrench and the overcapacity has to be liquidated. While both would be good in the long term it would not make the numbers that Mark follows look very good.

        • worse, what happens to the tier one capital of the banks?

          they are holding huge piles of us treasuries at 20-30:1 leverage.

          if the 5 year went to 2.5%, i think a large number would be insolvent.

          at 30:1 gearing, it does not take much of a drop in the price of bonds to wipe you out.

          more than anyhting else, that is what will hold the fed’s hand and i do not see a good way out of this corner into which we are painted. just how do the banks sell all these bonds? who will buy them if not the fed?

          • worse, what happens to the tier one capital of the banks?

            they are holding huge piles of us treasuries at 20-30:1 leverage.

            if the 5 year went to 2.5%, i think a large number would be insolvent.

            at 30:1 gearing, it does not take much of a drop in the price of bonds to wipe you out.

            This is something that Don Coxe pointed out almost a year ago when he was criticising the Basel Accord. I suspect that we will see a collapse in the financial sector. The options are to keep inflating for as long as possible or for an outright default on the liabilities and debt held by foreigners. Either would likely remove the reserve status from the USD.

            more than anyhting else, that is what will hold the fed’s hand and i do not see a good way out of this corner into which we are painted. just how do the banks sell all these bonds? who will buy them if not the fed?

            I think that we agree that there is no way out of the corner that the Fed has painted itself in.

          • The Fed could raise the RRR (Required Reserve Ratio) to drain liquidity out of the economy when growth accelerates, rather than sell bonds.

          • The Fed could raise the RRR (Required Reserve Ratio) to drain liquidity out of the economy when growth accelerates, rather than sell bonds

            When rates go up the value of the bonds goes down. Since those bonds are a major part of reserves held by the banks and they are leveraged as much as some hedge funds I suspect that many will be insolvent.

            On the plus side huge inflation rates will wipe away the value of unfunded liabilities.

          • The Fed could also raise interest rates on bank reserves to reduce liquidity.

            When the Fed sells bonds, it drains liquidity out of the banking system. When it buys bonds, it adds liquidity.

          • Vangel, bank reserves, e.g. excess reserves, are cash, not bonds.

            The Fed is holding treasuries as are the banks. My point and the point made by others is that when rates go up the value of those holdings will fall. Given the low amount held in reserves the banks will be insolvent. The Fed will not be in trouble because it has an arrangement with the Treasury that allows it not to disclose the losses because the taxpayer is on the hook.

          • Also, I may add, banks are very cautious, because they know they won’t be bailed-out, through “too-big-to-fail,” next time.

          • peak-

            i think you are missing the point we are trying to make.

            the banks hold large positions in us treasuries. this has been increased greatly by freddie and fannie buying up most of the new mortgage origination.

            the banks need to get some yield on that. us govvies are considered tier one capital, even at 20-30:1 leverage.

            a move of US rates to 2% would make most banks insolvent when they mark bonds to market.

            you cannot fix that with an RRR.

            you are thinking of the fed balance sheet. we are talking about the balance sheet at citibank.

            your notion that banks are being more careful is not actually true.

            lending standards may be higher, but the concentration of risks into us treasuries and the leverage at which they are owned are way up.

            this looks great right now as bond prices are VERY high due to twist and zirp and it makes tier one look good, but if rate rose on bonds, the 30-50% hits these banks would take on the mark to market principal value of these bond holdings will make the last crisis look like a day at the beach.

            the fed is never going to sell their bonds. they will just hold them to expiry. but the private banks are between a rock and a hard place. most of them own too many bonds to survive an end to zirp well. but if they all sell, the precise thing they need to avoid will happen (barring even more fed intervention, which, honestly, may wind up being what happens)

            we are painted into a nasty corner here.

          • Morganovich, you don’t seem to understand how money is created and destroyed by the Fed, through the commercial banking system, to regulate economic growth. There’s no risk to the banking system.

            The biggest problem is bond prices will fall and yields rise when economic growth accelerates. So, the Fed will sell bonds more cheaply, perhaps too cheaply, to drain enough money out of the commercial banking system to preempt inflation and maintain sustainable economic growth.

          • Here’s what some economists stated:

            The bigger the balance sheet, “the riskier the exit becomes,” Richmond Fed President Jeffrey Lacker said during a Nov. 20, 2012 speech in New York.

            “They have to find ways of unwinding the balance sheet without dumping all of it in the marketplace,” said Memani, who oversees a bond portfolio of about $70 billion, including about $6 billion of mortgage-backed securities.

            “The more they add to the balance sheet, the longer it will take to normalize,” said Hanson, who worked on designing tools that will be used in the Fed’s exit strategy as an economist in the monetary affairs division at the Board of Governors in 2009.

            “The exit is going to take a long time,” said Stephen Oliner, a resident scholar at the American Enterprise Institute in Washington and former Fed Board senior adviser…“We are deep into experimentation at this point,” Oliner said. “It’s understandable that people are worried.”

            My comment: Given the Fed’s track record (of falling behind the curve initially) failing to preempt inflation will be a bigger concern than causing a recession.

          • peak-

            if you think the fed selling bonds is the big issue, then you do not understand how tier 1 capital works nor wheat banks are currently holding on their balance sheets.

            comments like this:

            “Also, I may add, banks are very cautious, because they know they won’t be bailed-out, through “too-big-to-fail,” next time”

            make that very clear.

            with the fed buying huge piles of MBS’s and freddy and fannie buying the mortgages, the banks are FAR more levered to us treasuries than they were.

            when that treasury bubble (and yes, it’s a bubble that the fed has crested here) deflates, the banks are suddenly going to see huge mark to market hits.

            many will not be able to absorb them.

            we switched prime brokers last year over this issue to make sure our assets are domiciled someplace that will not evaporate when this happens.

            wait and see.

            the activist fed that you seem to favor has taken an easy bubble (.com, equity funded productive assets) and helped turn it into a hard bubble (real restate, debt funded non productive assets) and then that one into the worst of all, a government debt bubble.

            keep in mind that the fed completely missed the last bubble till it was bursting too.

            they were calling for a soft landing in real estate.

            the fed does not need to sell bonds for rates to rise with these sorts of deficits. it just has to stop buying.

            when it does, many banks are going to find themselves in a nasty spot.

            i’m not sure what you are not seeing here.

            with rates where they are, you need heavy leverage to make treasuries pay enough to even keep up with CPI.

            you need to own the 1 year at at least 15:1, maybe more just to break even in real terms. or, you can go out longer on the curve, but that has real risks too.

            the intersection of the basel rules and zirp/twist yields some pretty absurd risk decisions and makes the strategies used by banks highly monolithic. this is exactly how you get a crisis: everyone doing the same risky thing because that is what the rules require.

            these regulators are making finance far more, not less risky.

          • Morganovich, you’re talking about speculation independent of open market operations, which is just a tool to increase or decrease the money supply. You’re making much about nothing.

          • Exchanging one asset, U.S. Treasury bonds, earning 0.25%, for another, cash, earning 0.25%, doesn’t make much difference to bank profits.

            Banks make profits in many ways, e.g. loans (including loan fees), financial products, service fees, etc..

          • Banks make profits in many ways, e.g. loans (including loan fees), financial products, service fees, etc..</b.

            They have made most of their profit from using leverage. That works fine when the trend is with the banks but causes havoc when it reverses.

        • Guess Who’s Buying All the Bonds? (It’s Not the Fed)
          8 Jun 2012

          “The demand among average investors has swelled so much, in fact, that they bought more Treasurys in the first quarter than foreigners and the Fed combined.

          Households picked up about $170 billion in the low-yielding government debt during the quarter, while foreigners increased their holdings by $110 billion.

          The Fed, meanwhile, actually slightly decreased its net holdings.”

          • Guess Who’s Buying All the Bonds? (It’s Not the Fed)
            8 Jun 2012

            June 2012? That is an eternity in the markets. If you look at the numbers now the Fed is buying most of the new debt issued by the Treasury.

      • cit b-

        i think this was the more important language:

        “all but one member agreed to replace the date-based guidance with economic thresholds indicating that the exceptionally low range for the federal funds rate would remain appropriate at least as long as the unemployment rate remains above 6½ percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s longer-run goal, and longer-term inflation expectations continue to be well anchored.”

        given the way CPI is calculated and the the fed will use “core” it would take near hyperinflation to scare these guys. further they seem to use the longer end of the curve that they themselves are anchoring as a sign of inflation expectation which becomes awfully circular.

        this would seem to imply that the real think to watch us u3 and that at 6.5% we would see a drop in fed buying.

        i have real doubts this happens in 2013. i think bernanke will leave office in jan 2014 with the pedal still on the floor and leave the next guy to clean up the mess
        just as greenspan did to him.

        “fed chairman hot potato” seems to be the game these days.

        • morgan, there seem to members who have doubts on QE to infinity but only one dissenter, so far. He is inflation fighter Jeffrey Lacker, the Richmond Fed Prez. Here are Lacker quotes from an article on a November, 2012 speech:

          “”Crisp numerical thresholds may work well in the classroom models used to illustrate policy principles, but one or two economic statistics do not always capture the rich array of policy-relevant information about the state of the economy.”

          “If the Federal Reserve cannot limit credit policy of its own accord, legislation may be the best option.”

          • On inflation fighter Jeffrey Lacker’s dissent at the most recent FOMC meeting:

            “Mr. Lacker dissented because he objected to the asset purchases and to the characterization of the conditions under which an exceptionally low range for the federal funds rate would remain appropriate. He continued to view asset purchases as unlikely to add to economic growth without unacceptably increasing the risk of future inflation, and to see purchases of MBS as inappropriate credit allocation.(bold type add)

            Read more: http://www.businessinsider.com/december-fomc-minutes-2013-1#ixzz2H1sGjbk0

          • cit b-

            that was essentially my point.

            they are tryign to shift QE infinity to QE until 6.5% u3.

            of course, the effects they set off in the banking sector and crashes in tier one capital the end creates may drive u3 bank up etc.

            we basically have a crack addict monetary system at the moment. getting off of it is going to hurt.

            there is no painless way to kick a crack habit.

  2. I’m hesitant to call housing “strong” simply because it remains 63.4% below the pre-recession peak. Maybe it would be better to call it an “improving” market. But that’s just my two cents.

      • Neither one really bother me.

        Housing has been largely multi-unit (ie apartment) building.

        Autos need to be replaced simply because of age.

        With few exceptions, people do not have the money to buy a house or a car outright. They will always be financed by debt.

          • With few exceptions, people do not have the money to buy a house or a car outright. They will always be financed by debt“…

            Then again paul even the possibility to finance a large purchase might not exist in the near future for a lot of people…

            From Breitbart dated 5 Jan 2013: OBAMACARE LAYOFFS, HIRING FREEZES BEGIN

          • sure, debt can make sense but it is also pulling future spending forward which depresses future growth/consumption.

            debt spent on productive assets is one thing, but debt that funds consumption is just a shifting of consumption, not a creation of it per se.

            in a return to recession, such debt could be a headwind.

            it also makes me worried that cheap money is driving a significant portion of economic activity and that we could see that activity really dry up a after rates rise.

  3. We’re facing tax hikes, spending cuts, inflation (from destruction of capacity), overregulation, a weaker Europe, etc., in this deep depression (where the economy is underproducing by $1 trillion a year).

  4. Obama Re-Elected, Women And Minorities Hardest Hit

    “Government unemployment numbers for December showed that while the general unemployment rate remained flat at 7.8 percent, unemployment for women and African-Americans rose despite an economy that created 155,000 jobs. Unemployment for women rose to 7.3 percent in December from 7.0 percent while the rate for African-Americans rose sharply to 14.0 percent from 13.2 percent in November.” — Unemployment Rises for Women, African-Americans in December, CNS News

    Forward!

  5. Peak:
    “Also, I may add, banks are very cautious, because they know they won’t be bailed-out, through “too-big-to-fail,” next time”

    I’m curious what makes you assume this – I assume they will be bailed again…

    • The government has less money for bail-outs than 2008, which weren’t popular with the public and politicians.

      Financial institutions know they’ll be taken over by the government and given away, rather than bailed-out, resulting in huge or complete shareholder losses, and loss of independence.

    • Even with the bail-outs, the aftermath of financial institutions weren’t good, particularly AIG, Wachovia, Washington Mutual, Merrill Lynch, Bear Stearns, etc..

        • You can’t get much safer with cash, U.S. Treasury bonds (the safest investment in the world), and high-quality loans, although returns are low.

          • Sure you can get safer. Owning sovereign debt when interest rates are at record lows is not safe. Neither is holding cash when the government is trying to reduce its purchasing power.

  6. There is no shortage of buyers of Treasuries. Auctions are routinely oversubscribed. That won’t change for decades.

    The world has a glut of capital right now, and probably ongoing for decades. Even at zero bound, Western economies generate too much capital. This is a recent problem, not really understood.

    See Japan for pointers.

    The Fed’s QE program makes a great deal of sense, and should be ramped up.

    As a benefit, it deleverges the nation. Pays off federal IOUs with cash.

    I realize monetizing the debt is a heresy, blasphemous, sacrilegious. But it works.

    Japan did QE from 2001-5. It did not result in inflation. far from it, they are still troubled by deflation.

    Remember, we are in an era of capital gluts. A long-term era.

    Remember, even going to zero rates does not reduce the level of savings too much. Westerners and Asians save for college, to buy a house, for retirement, to start a business, and many are saving because even if they spend a lot they still have savings (the new centi-millionaire, billionaire class).

    Huge piles of capital are building up everywhere–there is $3-4 trillion added to ordinary US savings accounts since 2008.

    If some of this money enters the economy—and I think it is beginning to enter real estate—look out boom times.

    Boom, baby, boom.

  7. Glad to hear the information that the economy will move forward! Hope it come true. 2012 has been a tough year for us. The unemplyment rate has been high. I hope the recession we face this time is just a status quo, not a long-term thing. I used to look at the OSHA Posters in my workplace, and thought of protecting my rights by law, but now I know I should think of improving my condition by changing ourselves, such as learning a useful skill, which is more crucial. This situation is rather serious, we must work harder and wait for things to become better.

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